Athletic apparel retailer Lululemon Athletica (LULU 2.98%) recently reported its second-quarter results, which -- unsurprisingly -- exceeded consensus analyst estimates. Revenue of $2.2 billion was 18% higher than the year-ago period. And diluted earnings per share (EPS) increased 19% to a total of $2.68. 

While the stock has done well lately, up 24% this year, as of this writing it is trading 17% off its all-time high from November 2021. This sizable discount presents investors with a great opportunity to buy a wonderful growth stock on the dip. 

Lululemon is seeing strong momentum 

The latest financial update proves that it's business as usual for this thriving apparel company. Macroeconomic headwinds, like inflation, higher interest rates, and fears about a recession, appear to be nothing to worry about. Including the most recent quarter, Lululemon has increased both revenue and EPS by double digits on a year-over-year basis in 11 out of 12 three-month periods. This momentum is truly remarkable given the unusual events in recent years. 

Revenue in the men's and women's categories increased 15% and 16%, respectively, demonstrating broad-based growth for key customer groups. And digital revenue represented 40% of the overall business, which was slightly down from the second quarter a year ago. Even though same-store sales growth of 11% came in below analyst estimates, this reported figure was strong nonetheless. 

One metric that stands out is that international revenue rose 52% in the quarter, much faster than 11% for North America. In Greater China, sales were up 61%. "Our new store openings in 2023 will include approximately 35 stores in our international markets, with the majority of these planned for China," chief financial officer Meghan Frank said on the second-quarter earnings call. 

Management was so delighted with the results that it upgraded guidance for both revenue and net income this year. At the midpoint of expectations, sales are forecast to rise 18%, with diluted EPS up 81% in fiscal 2023. 

Lululemon is a premium brand 

Like any successful consumer-products business, Lululemon's most important attribute is its strong brand presence. I don't think there's any doubt in consumers' minds that this is really a premium offering in the marketplace. Compared to a chief industry rival like Nike, Lululemon's apparel typically carries higher price tags. And so its gross margin is higher than that of its larger competitor. Based on recent financial results, customers have clearly shown a propensity to pay up for Lululemon's merchandise. 

This brand recognition hasn't come from expensive marketing campaigns with high-profile athletes. On the contrary, Lululemon has relied heavily on building a grassroots and community-driven marketing plan, focusing on local store ambassadors who connect with consumers in their communities. It's clearly been working. 

Shareholders will be encouraged to know that the company's inventories of $1.7 billion were up just 14% year over year, trailing sales growth during that timeframe. As with many apparel companies, supply chain issues made it extremely difficult for management to properly secure the right amounts of merchandise, at one point leading to an inventory glut. But now it seems like things are normalizing, which is obviously a good sign for the brand and for margins. 

Putting the valuation in the right context 

Lululemon has been a wonderful investment, with shares up 163% in the past five years as of Sept. 8. Those gains crush the performance of the broader Nasdaq Composite index by a wide margin. And what is most impressive is that this market-beating performance has come from a clothing stock, not some high-flying tech enterprise. 

Lululemon shares currently trade at a trailing price-to-earnings (P/E) ratio of 50 and a forward P/E of 33. Those don't immediately signal appealing value, but given the company's growth trajectory, investors might consider paying a premium to own the fast-growing and hugely profitable Lululemon.